My View: Filling the gaps — financial and social

Thursday

May 1, 2014 at 8:00 PM

Although Zion Development has developed more than $20 million worth of housing in Midtown for all income levels, Zion is not a housing development organization. We are a neighborhood development organization working on all Six Elements of a healthy neighborhood.

We have learned that the major hurdle in developing housing is the financial gap — the difference between the value of the housing built or rehabbed versus the cost to do the building/rehabbing. The primary cause of the financial gap is location, location, location.

Say you build a house in an existing neighborhood. If your house is pretty much like all of the other houses in the neighborhood — in size, amenities and age — there may be no gap at all. Your house will have an appraised value very close to the appraised value of the others because your house is comparable to those nearby.

But if you build a McMansion in that same neighborhood, the appraiser will have a harder time finding nearby comps, so your bigger house will likely appraise at a value less than what it actually cost. That is the gap. Consequently, if a bank will not loan you enough money to cover the cost, you will have to find more money somewhere to fill the gap.

Property values in Midtown are lower than in most neighborhoods. In 2001, Zion did a complete renovation of a house in Midtown — new windows, heating system, plumbing, electrical, insulation — the works! The cost of that renovation was $157,000. Yet, the Winnebago County Assessor assigned this house a Fair Market Value of $54,846 (generally pretty close to an appraisal). The financial gap: $157,000 — $54,846 = $102,154!

According to the Winnebago County assessor, in the city of Rockford, there are 170 comparable homes of the same size, number of bedrooms, and other amenities as Zion’s Midtown house but with fair market values of $110,000 to $120,000 — twice the value of Zion’s Midtown house. Location, location, location.

There aren’t enough government grants or donor dollars to raise the property values of the housing in Midtown. So what should we do?

One way to improve a neighborhood’s housing and raise property values is for middle- and upper-income people to move into the neighborhood and invest their own capital to upgrade the housing. At its worst, this gentrification means that rich people come into a neighborhood in large numbers, buy up and improve property, and live there.

In the process, poor people are forced out either because the newcomers buy the housing out from under them or the improved housing forces everyone’s real estate taxes up until they can no longer afford to live there. Zion does not believe in doing this. Instead, Zion believes in what some call “gentrification with justice” — justice to the poor in particular.

For many years Zion has been an advocate for mixed-income housing and neighborhoods. We developed the Lantow Lofts as a strategy to bring people of faith and good will into Midtown who will invest their capital and their hearts in the neighborhood and in their neighbors, and who will ultimately work with their neighbors to build on the neighborhood’s strengths and address its needs.

This is not a short-term strategy. It takes courage and commitment. Zion is always looking for people who feel called to live in Midtown and to be a part of what God is doing here.